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It has been a good week for the markets, as front-line indices have been inching towards their two-month high. JITEN DOSHI, co-founder and chief investment officer at Enam Asset Management Company (AMC), states in an email interview with Puneet Wadhwa that corporate earnings growth will play a pivotal role in determining market performance going forward. Edited excerpts:
What’s your outlook for the markets? Are valuations a sentiment dampener for investors now?
The market rally is a function of earnings trajectory, participation structure, and liquidity.
In a global ecoscape where growth, certainty, stability, and prudence are hard to find in one place, India stands out with a better return profile, an established transparent market structure, a better earnings profile, and a better governance architecture. This reflects India’s nearly 65 per cent premium over its peers.
While valuations may appear rich at first glance, a closer examination through the prism of value spread (the gap between return on equity and cost of equity), the elevated cost of capital compared to recent trends, the resultant equity-to-bond yield spreads, and the five-decade low inflation differential compared to developed markets suggests that they are reasonably priced.
Earnings growth will be a key driver for market performance from here on out.
Is there a mismatch between markets and the macroeconomy?
In the recent past, on-ground consumer sentiments have been patchy, with a divergence between urban and rural consumption patterns. However, the market should maintain optimism on the back of range-bound oil prices, a softer or moderated input cost regime, healthy macros, a robust fiscal balance sheet, a better-than-expected monsoon, and moderating inflation.
As an economy, India is ready for its take-off decade. Any interim softness in the market presents a once-in-a-decade opportunity to board this flight.
In a supply-starved economy, there is enough appetite for local as well as global capital, which is hungry for growth opportunities.
What has been your investment strategy over the past few months?
We (Enam AMC) have always been sector- and market capitalisation-agnostic, offering strategies across the board.
Our portfolio construction is always anchored in diligently following our investment philosophy and strategy, which is to identify high-quality businesses that are structurally well-positioned, have sustainable competitive advantages, and possess strong execution capability for consistent long-term growth.
Regardless of the market’s tonality, there are always opportunities to make money in plain sight through this strategy.
Do you think the recent regulations for finfluencers, mutual funds, AMCs, and alternative investment funds are too stringent, and was the Securities Exchange Board of India’s (Sebi’s) move warranted?
Investors are exposed to a broad spectrum of information; some are authentic, and many are biased. Thus, when ill-informed customers get influenced by such a narrative, the losses are tremendous, both for the client and the industry.
Sebi has ensured a regulatory framework that places investor interests as paramount, and, therefore, steps to mitigate malicious deeds are always welcome.
Are new clients hard to come by now, as investors prefer to dabble in equities directly?
Portfolio management services (PMS) are distinctly different from other investment instruments in terms of catering to the investment needs of discerning, informed, and higher-risk investors.
It targets investors seeking the right balance of performance, personalisation, and risk tolerance. Greed and adventurism are natural bull market traits.
The interest in direct equities is a function of recency bias. Therefore, leakages to direct equity are understandable. What it badly requires is deeper engagement and the right alignment of risk profiles when it comes to the final sign-off.
Increasing incomes, wealth, and the demographic urge to explore newer sets of opportunities have exponentially expanded the total addressable market for the PMS industry.
How is your recently launched long-only Enam India Vision Portfolio shaping up?
Enam India Vision Portfolio is just six months old and is building a platform experience for our new set of clients. It is shaping up well in line with our flagship strategies, where we have demonstrated a long-term track record.
Since its inception in January 2023 (for the period ending July 2023), it has delivered a return (net of total fees and expenses) of 15 per cent with an alpha of 2.9 per cent over the benchmark index of the S&P BSE 500 TRI.
Enam has some dollar-denominated products as well. What has been the strategy here?
While we do have a dollar-denominated offering, it is more from the angle of attracting global monies seeking participation in Indian equities with minimum friction.
Our flagship global offering, the Enam India Growth Fund (EIGF), has a record of consistent outperformance over the past decade. Since its inception in June 2011 (for the period ending July 2023), EIGF-C (Class A1) has provided a return (net of total fees and expenses) of 13.6 per cent over the benchmark National Stock Exchange Nifty 500 with 6.7 per cent (in dollar terms), thus delivering an alpha of 6.9 per cent. Additionally, the calendar year-to-date return is 16.2 per cent versus Nifty 500 returns of 11.1 per cent (in dollar terms).
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